Already a member?

The Apple Zealots Could Have it All Wrong on Intel: Charting the Upside, and a 3.4% Dividend Yield

Intel (
INTC
) shares are not particularly popular these days, and Warren
Buffett's decision to dump them recently did nothing to raise
their status. Nevertheless, Intel remains a Dow company with a
track record of top quality tech innovation, plenty of money to
try it again and a dividend yield twice that of your U.S.
Treasury bonds. So what keeps investors from getting excited
about this company? A fixation on the Apple (
AAPL
) iPhone that makes it easy to overlook what's inside Intel.

Intel, unlike other chip makers, has not been invited to the
Apple iPhone party. While Apple buys Intel chips for its Mac
computers, Intel competitors like Broadcom (
BRCM
) and Qualcomm (
QCOM
) get the iPhone business. In other words, while Intel dominates
Apple's creeping-growth, old school business, other companies are
getting the fast-growing mobile device work; and sharing in the
gains a $100 billion revenue product like the iPhone can bring.
Visions of iPhone 5 money to come have made both those
competitors more interesting lately, as seen in a
stock chart
.

CEO Paul Otellini has vowed to rectify this situation by
making stuff for mobile devices so technically advanced that
Apple can't live without them. That's not happened yet, but deals
with Google's (
GOOG
) Motorola Mobility and several smartphone companies overseas
finally get Intel deep into the business. This lateness requiring
Intel to play catch-up is a big reason Intel shares trade at far
lower valuations than Broadcom or Qualcomm. That's a low
PE ratio
.

All that Apple talk tends to blot out a few of the rosier
details at today's Intel, particularly from a value investor's
perspective. Intel, with a market cap of $134.1 billion, reports
revenues up 62% and underlying profits up some 133% in the past
three years. The company still makes products for most of the
world's computer servers and data centers, and those sales are
going strong. Its shares offer a dividend yielding 3.4%; a payout
of which totals a tiny fraction of earnings any given year.
There's some $5.3 billion in cash. And its share price is up 43%
in the past three years, giving Intel a better record without
much mobile than Qualcomm and Broadcom investors got cashing in
on it. Here's the comparison with dividends.

Many investors remain skeptical of Intel's fundamental
philosophy going forward. The company miscalculated the speed of
the mobile tech revolution early on, and some believe it's still
underestimating the conversion. Intel leaders are putting a lot
of effort into ultrabooks components because they expect these
super light, super powerful computers can compete with iPads.
They say small but steady improvements in their smartphone
processors will lead to products so much better than those
offered by competitors that Apple and Samsung will find them
irresistible.

Perhaps those assumptions will prove a bit naïve. But it's not
hard to imagine that one of the biggest and best tech innovators
in the world will eventually invent its way into the massive
mobile market. Its fat
dividend yield
, cash hoard and cheap shares make Intel worthy of attention,
even if mistakes will be made.

Please note that once you make your selection, it will apply to all future visits to NASDAQ.com.
If, at any time, you are interested in reverting to our default settings, please select Default Setting above.

If you have any questions or encounter any issues in changing your default settings, please email isfeedback@nasdaq.com.

Please confirm your selection:

You have selected to change your default setting for the Quote Search. This will now be your default target page;
unless you change your configuration again, or you delete your
cookies. Are you sure you want to change your settings?